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The Role of Risk in Entrepreneurship

For entrepreneurs, risk is part of the process. Starting a new business and working to achieve success creates difficult situations and unique obstacles that entrepreneurs must overcome. From the beginning, entrepreneurs must take risks that could jeopardize their finances, health, and stability. Taking calculated risks is an essential part of the entrepreneurial journey. Risk Types […]

destry witt risk entrepreneurship

For entrepreneurs, risk is part of the process. Starting a new business and working to achieve success creates difficult situations and unique obstacles that entrepreneurs must overcome. From the beginning, entrepreneurs must take risks that could jeopardize their finances, health, and stability. Taking calculated risks is an essential part of the entrepreneurial journey.

Risk Types

The kinds of risk entrepreneurs can take are varied. Market risk is one of the most common types, referring to the risk an investor takes due to market fluctuations. This kind of risk is expected when starting a new business for both the entrepreneur and any initial investors they enlist. Other kinds of risk include technology, credibility, and competition. Incorporating new technology into your business practice comes with some risk such as whether the cost of the programs or devices will outweigh the profitability of their application. Another form of technological risk involves the potential failure of technology which can result in data breaches, website crashes, and information theft.

Another form of risk involves competitors’ pricing and marketing strategy which can be volatile and disruption. When starting a new business, credibility is typically low, and many consumers prefer to buy from a brand they know and trust. Taking risks in these areas are common and often necessary for entrepreneurs.

Getting Started

When starting your own business, entrepreneurs must be aware that their decisions are somewhat risky. Starting a business is, at its core, an investment; entrepreneurs must contribute their own money to support a venture that may not initially succeed. Many entrepreneurs who begin their businesses leave existing jobs to start something new; this means that they are dependent entirely on their own capital. With no external funding, entrepreneurs stand to lose financiallyshould they experience hardship or unanticipated obstacles.

However, this initial risk has a significant payoff. Entrepreneurs who take such significant risks are careful about how they go about it. They understand that such risks are essential on the path to success. Each move in this first phase of starting their business is calculated in order to account for potential setbacks and to reap the highest rewards.

Growth

As an entrepreneur, paving new paths and making mistakes are expected. Taking risks, even those that don’t pay off, provides valuable experience and learning opportunities. Even with a network of experienced entrepreneurs and capable partners at your disposal, entrepreneurs must learn from their own experimentation. Innovation stems from new ideas which are inherently risky. Being willing to take such risks for the sake of success is crucial for entrepreneurs who want to establish themselves as forerunners in competitive industries.

Though being an entrepreneur involves risk, that is rarely a deterrent. With a sufficient knowledge of an industry as well as market trends, competitor habits, and technology failsafes, entrepreneurs can take risks without acting carelessly and jeopardizing their efforts.


Destry Witt writes independently of his business, RELiANCE Investing, Inc., which is a Registered Investment Advisor only. This information is not intended to be personalized. This content is for informational purposes only. Nothing presented here should be construed by anyone as an invitation or solicitation to buy or sell any investment.

Originally published on DestryWitt.net

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